Lessons from the Blanchard Administration

In an earlier post we quoted Thomas Friedman and Michael Mandelbaum from their book That Used to Be Us on tax and spending policy. They wrote:

… the purpose of the exercise: It is not simply to reduce the deficit but to insure prosperity. Solvency is vital, but it is not enough. To uphold American greatness the country will have to do more than get its debt-to-GDP ratio to a reasonable and sustainable level, although it will certainly have to do that. It will also have to equip its people with the skills and tools that have always been part of our formula for economic growth. Providing them will cost money and require long-term investment. To assure the nation’s economic future we will have to spend more, not less, on some things: infrastructure and research and development, and probably education as well.

Years before Freidman and Mandelbaum laid out this path to prosperity, Governor Blanchard implemented their recommended formula. Governor Blanchard understood that his job was “not simply to reduce the deficit but to insure prosperity”. That he was elected to grow the economy, not just balance the budget. The result, as we documented in previous posts (you can find them here and here) was that during his term Michigan had its strongest job growth in four decades (covering the terms of Governors Milliken, Engler and Granholm as well as his eight years in office).

The Blanchard/Friedman/Mandelbaum formula––that worked for Michigan in the Blanchard years and, more importantly, for America in the Clinton years––has three pillars:

Spending cuts followed by spending restraints

Making public investments that grow the economy, particularly education and infrastructure

Higher taxes. Now more accurately eliminating tax cuts enacted over the past several decades that did not work to grow the economy.

Governor Blanchard knew to assure the state”s “… economic future we will have to spend more, not less, on some things: infrastructure and research and development, and probably education as well.” And to produce the revenue to make those strategic investments required both spending restraints and tax increases.

The strategy we have put in place since the Blanchard Administration, on a bi-partisan basis, cutting taxes and reducing public investments hasn’t worked. As those policies have been implemented, Michigan has experienced substantially slower job and personal income growth than the nation. Seems like, at the very least, it is time for some policy makers and/or candidates to make the case that the Blanchard formula is the path we should return to if we want to restore Michigan to long term prosperity.

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.